The Stoxx Europe 600 XX:SX7P banks index dropped over 4%, with shares in Deutsche Bank XE:DBK down 7%, Bank of Ireland IE:BIRG down 6% and HSBC Holdings UK:HSBA falling 5%. On Thursday, the SPDR S&P Regional Banking ETF KRE slumped 8%.The Stoxx Europe 600 SX7P banks index dropped over 4%, with shares in Deutsche Bank DBK down 7%, Bank of Ireland BIRG down 6% and HSBC Holdings HSBA falling 5%. On Thursday, the SPDR S&P Regional Banking ETF KRE slumped 8%.
Bank fears have been exacerbated this week by Silvergate Capital SI voluntarily liquidating its banking subsidiary, and Silicon Valley Bank parent SVB Financial SIVB launching a $1.75 billion share sale to plug a hole caused by the sale of a loss-making Treasury securities portfolio. “This is an issue that could hit all the banks, including the big banks, because the banks amassed a lot of assets since the 2007/2008 financial crisis at rising prices, and they had to pay nearly no compensation for bank deposits, as interest rates have been near zero for such a long time,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
Banks that have traditionally borrowed short and lent long are being hurt a deeply inverted yield curve. The 2-year yield TMUBMUSD02Y earlier this week was its most inverted against the 10-year yield TMUBMUSD10Y since 1981. The German 2-year TMBMKDE-02Y yield is also higher than the German 10-year TMBMKDE-10Y .
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